The semiconductor business is thriving, with massive growth in both data centre and PC demand – a situation that has led to supply constraints.
Bob Swan, chief financial officer and interim-CEO of Intel CFO and Interim CEO, says in an open letter that the first half of this year has showed remarkable growth for the industry.
“The continued explosion of data and the need to process, store, analyze and share it is driving industry innovation and incredible demand for compute performance in the cloud, the network and the enterprise,” he writes.
“In fact, our data-centric businesses grew 25% through June, and cloud revenue grew a whopping 43% in the first six months.
“The performance of our PC-centric business has been even more surprising,” Swan adds. “Together as an industry, our products are convincing buyers it’s time to upgrade to a new PC. For example, second-quarter PC shipments grew globally for the first time in six years, according to Gartner. We now expect modest growth in the PC total addressable market (TAM) this year for the first time since 2011, driven by strong demand for gaming as well as commercial systems – a segment where you and your customers trust and count on Intel.”
But this has brought a challenge in the form of new pressure on Intel’s factory network, he adds.
“We’re prioritising the production of Intel Xeon and Intel Core processors so that collectively we can serve the high-performance segments of the market,” Swan explains. “That said, supply is undoubtedly tight, particularly at the entry-level of the PC market.
“We continue to believe we will have at least the supply to meet the full-year revenue outlook we announced in July, which was $4,5-billion higher than our January expectations.”
To address this challenge, Intel is taking the following actions:
* Investing a record $15-billion in capital expenditures in 2018, up approximately $1-billion from the beginning of the year. That $1 billion is being used in the 14nm manufacturing sites in Oregon, Arizona, Ireland and Israel.
* It is making progress with 10nm, with yields are improving volume production expected in 2019.
* A customer-first approach, working with partners’ teams to align demand with available supply.